(Reuters) - Spanish
airline Iberia is to axe almost a quarter of its workforce and
rationalize its network under a restructuring plan launched on Friday by
its parent International Airlines Group, the owner of British Airways.
Iberia, Europe's biggest
carrier to Latin America, has been battling competition from low-cost
airlines and high-speed trains, labor disputes and Spain's deep economic
crisis and bleeding cash as revenue fails to cover high operating
costs.
"Iberia is in a fight for
survival and we will transform it to reduce its cost base so it can
grow profitably in the future," IAG's chief executive Willie Walsh said.
IAG's plans got an angry
response in Spain, where pilots' union SEPLA and the two biggest general
unions, the UGT and CCOO, immediately threatened strike action.
IAG, which was formed by
the 2011 merger of BA and Iberia, said it hopes the restructuring plan
will improve profits by at least 600 million euros in the next three
years.
The group posted a 96
percent fall in nine-month operating profits on Friday, to 17 million
euros, pulled lower by high fuel costs and a 262 million-euro operating
loss at Iberia.
British Airways, meanwhile, posted a nine-month operating profit of 286 million euros.
DOWNSIZING FLEET
In addition to the job
losses, IAG said it will cut capacity in the airline's network by 15
percent in 2013, focusing on profitable routes and downsizing its fleet
by 25 aircraft.
"Although radical changes
are proposed at Iberia, this reflects the scale and extent of the
problems there," Espirito Santo analyst Gerald Khoo said.
"The problems are
systemic and pre-date the current economic crisis, and we continue to
believe the market has underestimated the scale and nature of the
challenge faced by Iberia."
IAG said it expects to
make an operating loss of about 120 million euros in 2012, after trading
losses related to its bmi subsidiary, which it bought this year, and
exceptional items.
The group's share price, which has dropped 40 percent since the merger, was up 2.4 percent for the day on Friday at 172 pence.
IAG held simultaneous
meetings on Friday to present its new viability plan: one with investors
in London and another with unions in Madrid, where Friday was a bank
holiday.
Unions attacked the plan
to cut Iberia's 21,000-strong workforce by 4,500 and discontinue parts
of its maintenance and handling business.
"This plan completely
depletes Iberia. If this is a consolidated group, why are all the
sacrifices being made in Spain?," SEPLA representative Justo Peral said.
STRIKE THREAT
SEPLA, along with the UGT
and CCOO unions, issued a statement threatening to strike, though Peral
said that any action would be weighed carefully because of the ongoing
arbitration process between IAG and the pilots' union.
IAG has been in conflict
with SEPLA over pay and conditions for the past year. Tensions
heightened after Iberia created low-cost carrier Iberia Express in March
to compete with budget rivals such as Ryanair and easyJet on shorter
routes.
The Spanish government appointed an arbitrator but the situation has yet to be resolved.
This has resulted in
uncertainty over IAG's ability to continue to grow Iberia Express and
may have prompted IAG's decision on Thursday to launch a bid to buy the
rest of low-cost airline Vueling.
IAG said it would present
information on the takeover at the end of November, and that it did not
intend to merge Vueling with Iberia Express.
IAG also plans to cut pay
for Iberia's remaining 15,000 workers by between 25 and 35 percent, the
company confirmed in a conference call with Spanish reporters.
Unemployment in Spain has
reached a record high of 25 percent as large companies such as
Telefonica make drastic job cuts as they grapple with the country's
prolonged recession.
IAG has set a January 31
deadline to reach an agreement with the unions over the Iberia job cuts,
aiming to finish the process by the summer 2013 tourist season.
"We are trying to give
Iberia a future. We have the cash to make these changes now and cannot
delay this any further," Iberia chief executive Rafael Sanchez-Lozano
told investors.
http://www.reuters.com
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